Item 1.01 Entry into a Material Definitive Agreement.
As described below, on May 4, 2020, Front Yard Residential Corporation ("Front
Yard" or the "Company") entered into a Termination and Settlement Agreement with
certain affiliates of Amherst Residential, LLC ("Amherst") to terminate that
certain Agreement and Plan of Merger, dated as of February 17, 2020 (the "Merger
Agreement"), by and among the Company, BAF Holdings, LLC ("Parent") and BAF Sub,
LLC, a wholly-owned subsidiary of Parent ("Merger Sub"). As contemplated by the
Termination and Settlement Agreement, Amherst has agreed to pay the Company a
$25 million cash termination fee, purchase from the Company 4.4 million shares
of Front Yard common stock for an aggregate cash purchase price of $55 million
($12.50 per share) pursuant to an Investment Agreement (as described below), and
provide the Company with a $20 million committed Non-Negotiable Promissory Note
(as described below).
Investment Agreement
On May 4, 2020, in connection with the Termination and Settlement Agreement (as
described below), Front Yard entered into an Investment Agreement (the
"Investment Agreement") by and between the Company and Amherst Single Family
Residential Partners VI, LP (the "Purchaser"), an affiliate of Amherst, pursuant
to which, among other things, the Company agreed to issue and sell to the
Purchaser, and the Purchaser agreed to purchase, 4.4 million shares of Front
Yard common stock (the "Acquired Shares") from the Company at a price of $12.50
per share for an aggregate cash purchase price of $55 million (the "Purchase
Price"). The closing of the transaction will be scheduled as promptly as
practicable and no later than May 19, 2020. The Purchaser has also agreed to a
customary standstill for a two-year period and a restriction on transferring the
Acquired Shares for one year (other than to permitted transferees). Beginning on
the first anniversary of the closing date, the Purchaser will be entitled to
transfer up to 1.1 million of the Acquired Shares per quarter on a cumulative
basis.
The Investment Agreement is filed as Exhibit 10.1 hereto and is incorporated
herein by reference. The foregoing description of the Investment Agreement does
not purport to be complete and is qualified in its entirety by reference to such
exhibit.
Promissory Note
On May 4, 2020, in connection with the Termination and Settlement Agreement,
Front Yard entered into a Non-Negotiable Promissory Note (the "Promissory Note")
by and between Front Yard and Amherst SFRP VI REIT, LLC (the "Amherst
Noteholder"), pursuant to which, among other things, the Amherst Noteholder
committed to make advances from time to time to Front Yard in an aggregate
principal amount of up to $20 million.
The Promissory Note matures on May 4, 2022 and the outstanding principal balance
thereof bears interest at LIBOR plus 5.00% per annum. Advances under the
Promissory Note are available in multiple draws with minimum draw increments of
$500,000, subject to prior written notice and absence of an event of default.
Amounts under the Promissory Note can be repaid at any time and from time to
time, without premium or penalty, and amounts repaid may be reborrowed.
The Promissory Note contains a limited set of customary representations and
warranties, covenants and events of default, and does not contain any financial
covenants.
The Promissory Note is filed as Exhibit 10.2 hereto and is incorporated herein
by reference. The foregoing description of the Promissory Note does not purport
to be complete and is qualified in its entirety by reference to such exhibit.
Amendment of Repurchase Facility with Credit Suisse and Termination of Nomura
Facility
On April 30, 2020, Front Yard and certain of its affiliates entered into an
amendment of its repurchase facility (the "CS Amendment" and the repurchase
facility amended thereby, the "CS Repurchase Facility") with Credit Suisse AG
("CS"), pursuant to which the effective maturity date of the CS Repurchase
Facility was extended to the earlier of (i) June 30, 2020 and (ii) the date of
the occurrence of an event of default thereunder.
Certain other amendments to the CS Repurchase Facility implemented by the CS
Amendment include a revised pricing schedule and an increased funding fee on
future purchases thereunder.
On May 1, 2020, Front Yard and certain of its affiliates entered into an
amendment to the Third Amended and Restated Master Repurchase Agreement and
related transaction documents (the "Omnibus CS Amendment") with CS, pursuant to
which, among other amendments, the buyers thereunder agreed to extend additional
credit in an aggregate principal amount of approximately $33.3 million.
The proceeds of the incremental amounts advanced under the CS Repurchase
Facility on the effective date of the Omnibus CS Amendment were used to repay in
. . .
Item 1.02 Termination of a Material Definitive Agreement.
Termination and Settlement Agreement
On May 4, 2020, Front Yard entered into a Termination and Settlement Agreement
(the "Termination and Settlement Agreement"), by and among the Company, Parent,
Merger Sub, and the Purchaser, pursuant to which, among other things, Parent
will pay $25 million in cash (the "Settlement Payment") to the Company by May 5,
2020 and the Merger Agreement will be terminated by mutual written consent of
the Company and Parent, effective upon receipt by the Company of the full amount
of the Settlement Payment. Under the Termination and Settlement Agreement, the
parties agreed to release each other from all claims and actions arising out of
or related to the Merger Agreement, the Equity Commitment Letter, the Limited
Guarantee, the Debt Commitment Letter, and the Voting Agreements (as such terms
are defined in the Merger Agreement) or the transactions or payments
contemplated by any of the foregoing.
The Termination and Settlement Agreement is filed as Exhibit 10.3 hereto and is
incorporated herein by reference. The foregoing description of the Termination
and Settlement Agreement does not purport to be complete and is qualified in its
entirety by reference to such exhibit.
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Termination of Nomura Facility
On May 1, 2020 the loan facility outstanding under the Second Amended and
Restated Loan and Security Agreement, by and among, inter alios, Nomura
Corporate Funding Americas, LLC as lender and certain affiliates of Front Yard,
and with respect to which Front Yard was a guarantor (the "Nomura Facility"),
was terminated and repaid in full with amounts advanced under the CS Facility
and all liens and guarantees granted in respect of the Nomura Facility were
released, discharged and terminated.
Item 2.02 Results of Operations and Financial Condition.
On May 4, 2020, Front Yard issued a press release announcing, among other
things, certain financial results of the Company for the quarter ended March 31,
2020. A copy of the press release is attached as Exhibit 99.1 and incorporated
herein by reference.
The information in this Item 2.02, including the information in Exhibit 99.1, is
furnished solely pursuant to Item 2.02 of this Form 8-K. Consequently, it is not
deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934, or otherwise subject to the liabilities of that Section. It may only be
incorporated by reference in another filing under the Securities Exchange Act of
1934 or Securities Act of 1933 if such subsequent filing specifically references
this Item 2.02 of this Form 8-K.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
See Item 1.01 above regarding the "Amendment of Repurchase Facility with Credit
Suisse," which is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 hereof is incorporated herein by
reference.
The Company is offering the Acquired Shares to the Purchaser in reliance on
exemptions from registration provided under Section 4(a)(2) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
The Company relied on this exemption from registration based in part on
representations made by the Purchaser in the Investment Agreement, which
included that it is an "accredited investor" (as defined in Rule 501 under the
Securities Act).
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